Achieving Sustainable Growth Through Business ... - DuPont

Achieving Sustainable Growth Through Business Productivity Optimization Juan Aguiriano Managing Director, Worldwide Sustainable Operations Sustainable Solutions

March 19, 2012

Copyright ©2012 E. I. du Pont de Nemours and Company. All rights reserved. The DuPont Oval Logo, DuPont™, and The miracles of science™ are registered trademarks or trademarks of DuPont or its affiliates.

Productivity, Quality, Profitability, Safety Issues

Sustainability Contact – The DuPont Bradley curve

Organization cultural maturity

Reactive

Dependent

Natural Instinct Compliance is the Goal Delegated to Manager Lack of Management Involvement

Management Commitment Condition of Employment Fear/Discipline Rules/Procedures Supervisor Control, Emphasis, and Goals Value All People Training

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Independent Personal Knowledge, Commitment, & Standards Internalization Personal Value Care for Self Practice, Habits Individual Recognition

Interdependent Help Others Conform Others’ Keeper Networking Contributor Care for Others Organizational Pride

Achieving Sustainable Growth Through Business Productivity Optimization

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Topics •

The Drivers for Sustainability

•

DuPont Sustainability Journey

•

The Roadmap to Sustainable Growth

•

Sustainable Operations: The DuPont Production System

•

DuPont Sustainable Solutions

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The Drivers for Sustainability

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Prime Minister of Malaysia driving sustainable growth...

BBC May 19, 2011: ‘Prime Minister Najib Razak wants to wave goodbye to "business-as-usual" growth

Kuala Lumpur May 17, 2011: The Malaysian Prime Minister announced the launching of an ambitious plan to build a "green economy" in Malaysia with the help of an international advisory council that includes an impressive cast-list*

The initiative is part of economic reforms instituted by Prime Minister Najib Razak aimed at pushing the Southeast Asian country towards developed-nation status by 2020.

Including Jeffrey Sachs, special advisor to UN Secretary-General Ban Ki-moon; Rita Colwell, former head of the US National Science Foundation; Nobel Medicine laureate Richard Roberts, currently chief scientific office with New England Biolabs; and Kiyoshi Kurokawa, former science advisor to the Japanese prime minister. YBhg Dato' Shamsul Azhar Abbas

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External “Drivers” for companies to be more sustainable

External drivers

Volatility, magnitude and escalation of raw materials costs and energy are increasing the urgency to drive improvements in efficiency and productivity

Governments and global institutions are introducing new environmental and energy management regulations and policies, pressuring companies & societies into action.

1. Resource costs

2. Public policy

3. Access to capital

The Investment community is increasing the scrutiny on a company’s sustainability performance and capabilities when making investment choices.

4. Public accountability

Companies are expected to publish sustainability improvement goals and are being held accountable for delivering results.

5. Competition

Sustainability is being used as a powerful strategy to lower the cost of goods and attract customers at every level globally.

Sources: 1Generation IM (2007), 2Freshfields Bruckhaus Deringer (2005). 3EU Eurobarometer Survey (2008). 4Salterbaxter (2007)

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Sustainability Challenges Across different sectors Key End Markets

Sustainability challenges

Exploitation of unconventional resources Resource nationalization and growth of NOCs Shift in global wealth distribution Adapt grid to intermittent renewables and new uses of electricity (e.g., for electric cars) Increase access to electricity

Climate change / carbon risk Smart energy Low-carbon / renewable energy EHS excellence Socio-economic impact of activities

Chemicals

Increasing and more stringent regulations Increasing prices of raw materials Shifting production and demand between geographies and segments

EHS excellence Sustainable product portfolio Sustainable supply chain Product regulation

Mining & Metals Processing

Decreasing quality of ore fields leads and increasing exploitation difficulties lead to lower margins Increasing regulations

EHS management Climate change and carbon regulation Land use and claims Social development in rural area Human rights Clean technologies

Increased travel demand and changing behaviors Fuel availability and price Aging transportation infrastructures

Climate change Carbon regulation Impact of infrastructure

Energy (Oil & Gas, Power)

Transportation (Rail, Aviation, Infrastructure) 7/10/2013

Industry challenges


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…Global players consider Sustainability as a prerequisite for business success driving them to a clear positioning to capture the benefits, for existing and future assets Risk Mitigation

Awareness and Compliance

Licence to Operate

Cost Reduction

Operational Efficiency

Revenue generation

Innovation

Operational Excellence

Competitive advantage

Influence on Society and the competitive landscape

Sustainable Growth

Source: M. E. Porter and M. R. Kramer - ‘Strategy & Society - The Link Between Competitive Advantage and Corporate Social Responsibility’, Harvard Business Review, 12/2006

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DuPont Sustainability Journey

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The Mission of DuPont

SUSTAINABLE GROWTH The creation of shareholder and societal value while we reduce the environmental footprint* along the value chains in which we operate.

* DuPont defines “footprint” as all injuries, illnesses, incidents, waste, emissions, use of water and depletable forms of raw materials and energy.

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Journey Toward Sustainable Growth

Value

Based on a foundation of environmental stewardship

CEO Ed Woolard takes a stand, 1989

Footprint Reduction Goals Toxic air emissions: 70% Air carcinogens: 90% GHG emissions: 40% Hazardous waste: 35%

Corporate Environmentalism

Actual Reductions by 2000 Toxic air emissions: 75% Air carcinogens: 92% GHG emissions: 55% Hazardous waste: 46%

Compliance

1970

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1980

1990 Business Integration

2000


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Journey Toward Sustainable Growth Based on a foundation of environmental stewardship CEO Chad Holliday, Sustainable Growth Mission

Value

CEO Ed Woolard takes a stand, 1989

Market-facing Goals

Sustainable Growth Corporate Environmentalism Energy Goals Footprint Reduction Goals

Compliance

1970

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1980

1990 Business Integration

2000

2010


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So far, DuPont has achieved a significant footprint reduction

* TRI = Toxic Release Inventory

Cost savings: Over $6 Billion (USD) Industry recognition: “Laggard” to “Leader” 427th consecutive quarter dividend

Sources: DuPont Global Reporting Initiative (GRI) report: http://www2.dupont.com/Sustainability/en_US/assets/downloads/2 011_DuPont_GRI_Report.pdf

DuPont Sustainability Progress Report: http://www2.dupont.com/Sustainability/en_US/index.html

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Striking the Sustainability Balance: Establishing & Implementing an Effective Sustainability Strategy

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We are also on track to deliver on our 2015 Footprint and Market Facing Goals Reducing Environmental Footprint Greenhouse Gas Emissions > 14.62 MM metric tCO2eq Water Conservation > 32 billion gallons Fleet Fuel Efficiency > 100% leading tech vehicle Air Carcinogens > 0.9 million pounds Independent Verification of Site Programs > 100 % site Serving the Marketplace Environmentally Smart Market Opportunities from R&D Efforts > 640 MM$ Products that Reduce Greenhouse Gas Emissions > 2 Billion $ revenues Revenues from Non-Depletable Resources > 8 Bllions $ revenues Products that Protect People > 1.000 products DuPont Sustainability Progress Report: http://www2.dupont.com/Sustainability/en_US/DuPont_2010_Sustainability_Progress_Report.pdf 7/10/2013


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The Roadmap to Sustainability

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In the early 90’s, Chad Holliday, DuPont CEO’s at that time, identified the critical success factors for sustainable growth 1. Vision Clearly Defined by Leadership at the Top 2. An Implementer 3. Set Public Goals/Metrics so Everyone has Something to Measure Progress Against 4. Organizational Engagement and Culture Transformation 5. Corporate Sustainability Planning Process – Fully Integrated with Strategic Business Planning Process 6. Implementation Excellence 7. Recognize Key Programs & Accomplishments 8. Form External Relationships with Key Stakeholders 7/10/2013


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Success depends on the ability to integrate and execute the following sustainability roadmap 5 STEPS 1

BENEFITS

Optimal allocation of resources to ensure the highest return on sustainability investments

Understand the impact of the key drivers

Accelerated progress towards sustainability goals

Integrate sustainability in the ambition, strategy and objectives

Reduced corporate sustainability risks

Manage risks, reduce costs and build stakeholder’s value

Increased organizational alignment, clarity, and operational discipline

Develop competencies and support cultural change

Increased national and international recognition, reputation and interest level for investors

Build the business case for sustainability

2

3

4

5

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1 Build the business case for sustainability, identifying and quantifying its 1. tangible and intangible value

VALUE

Stakeholder

…for all the company stakeholders.

Shareholder

…generating tangible & intangible value… …looking at pragmatic actions that can unlock value for the organization… A sustainability business case is grounded in products, processes and footprint…

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Lower Risk Exposure Better Products

Market Share Reputation Leadership Strengthen Bottom Line

Paid Dividends Free Cash Flow Cost of Capital

Revenue Growth

Better and Safer Processes

Cost Reduction Smaller Footprint


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2 Understand the impacts of the key external drivers on the company and 2. combine them with the company ambition to be sustainable

Key external drivers for strategic positioning Regulation How are regulations influencing your business now and in the future? Stakeholder expectations What do stakeholders expect from your company regarding sustainability related issues? Cost/benefit What is the potential social and environmental impact reduction and which actions improve your business value?

Competition How is the current sustainability performance of the industry and what are the best practices?

YOUR COMPANY

Technology What technology can help you reduce your social and environmental impact across the regions and value chain?

Your own ambition To what extend do you wants to match/exceed stakeholders expectations?

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3 Set the ambition and integrate sustainability into the business vision, 3. strategy and objectives of the company

Leading edge

Sustainable Growth Define ambition Set strategy and Implementation roadmap

Zone of acceptability

Release value Sustain results Trailing edge

2000

2011

2020

Timeline

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4 Implement an integrated sustainability management system to manage 4. risks, create options, reduce costs, and build stakeholder’s value; measure and communicate the performances externally

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Sustain the results in your operations: develop competencies and drive

5 cultural change with the appropriate organizational structure and

management processes to “operationalize” sustainability

People Management Culture

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Strong Leadership

Commitment Policies & principles Performance Goals & plans

Appropriate Organizational Structure

Supportive staff Accountability Integrated structure Performance & motivation

Systems Processes and Actions

Management Best practices Communication processes Training & development Learnings, Audits & re-evaluation


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DuPont Global Integrated Operations – At a glance DuPont Integrated Operations Worldwide Including “Danisco”

80

90

100

110

120

Supply Chain Costs

Delivery to Promise (DTP) 2007

2008

2009

Production Volumes 2010

Diverse Operations

Seeds Discrete Parts Food Additives Industrial Biotech Paint production Film production Polymer Production Fiber production Consumer goods Electronic materials Continuous chemical process Fine and custom chemicals Fluorine Chemicals

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2011

Global Supply Chains Plant sites Warehouses Shipping Employees (approx.) Countries Contract operations New Product Launches NPS “Avg Annual Imp” Annual Gross Productivity

117 239 Sites 450+ Major Container user 38,000+ 45 1000+ Sites 5%-25% 2%-3% > $1B per year PTOI


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DuPont Operations: From Continuous Improvement Journey to Transformational DuPont OperationsChange – CI Journey Lean Technology CMLT BfAPC IQC/CIC

Process Control CoC BfPC

BfQ&PC CELT

•World Class Technologies

CFM

Organizational Effectiveness • Levels of Thought • Modes of Behavior

APLT

Maintenance & Reliability

AELT

Quality Management

• Integrated World Class Technologies & Assessment Process

Energy CoC

•High Performance Work Systems - HPWS

•Total Quality Management • DuPont Continuous Improvement Criteria (DCIC)

CI Drivers • Permanent Investment Turnover •Cash Flow Cycle Time • Fixed Cost Productivity • Variable Margin

• Internal Benchmark of Mfg Managing Practices at site level and business level •UPtime Excellence Self-Assessment •External Benchmark of Practices and Assessments •Mfg Excellence Self-Assessment -Dacron® • Operations Excellence Self-Assessment

• Adv. Process Control • Maintenance Benchmark Study Benchmark Study •Maint. Exc. Recognition Process

A.T. Kearney The Saturday Review

SECTORS & STRONG CENTRAL FUNCTIONS

•Mfg Standards (10) • Corporate Yield, UPtime and Production Capability

DuPont/McKinsey Operations Discovery Benchmark – Five Strategic Building Blocks

Integrated Operations sectors to SBUs, smaller central groups

ONE DUPONT FUNCTIONAL COMPETENCY DuPont-McKinsey Operations Benchmark Study

•Supply Chain Integration & Management (cycle time reduction) •MRP II

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2006 Initiatives have had a variety of effectiveness and impact !

2007

2008

2009

2010

Need for Step Change Improvement

Relative Competitiveness

TOP QUARTILE Performers

x

DuPont Operations

x x

Gap to top quartile

Time

2006

2010 Top manufacturing companies DuPont

June / December 2006 – The size of the prize High Cut Estimates Category Non-energy raws (yields, waste) Energy Other variable costs

Spend/basis $ millions

Opportunity range

Prize $ millions

11,000

1%-2%

100-200

1,100 1,800

5%-7% ~1%

50-100 20

4,000

7.5%-15%

400-600

Maintenance ex materials

540

10%-20%

50-100

Turnaround maintenance – Uptime

330

2.5%-10%

10-40

1%-2%

300-600

7.5%-15%

15-30

tbd

tbd

Fixed costs ex Maintenance

Uptime (capacity release) Maintenance materials Raw materials procurement

29,000 200 11,000

Total

900-1,700+


Managing Process

Technical Model

Capabilities Engine

Current and future requirements for capability and performance

Role modeling/ coaching dialogue/ difficult discussions

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Focus on what really matters, with the right people

The right tools and practices to solve root level problems

Mindsets and Behaviors

The right skills and coaching

Required Business Outcomes

People instinctively doing the right things

An integrated management system that fully develops people and organizational capability for effectiveness and creativity in utilizing assets and eliminating all waste.

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Sustainable Results Continuous Improvement Validated Benefits

DPS Deployment across all Regions and SBU’s 2007

2008

2009

2010

2011

Small Sites

0

2

23

54

44

Large Sites

2

13

23

12

3

2007

2008

2009

2010

2011

Actual

Actual

Actual

Actual

Plan

Fixed Cost

335

209

505

275

200

Variable Cost

165

397

652

460

350

Capacity Release

25

200

83

410

300

Total

525

621

1240

1100

850

Working Capital 401

412

997

430

375

MM$

Cumulative improvements of more than USD 5 billion (much more than initial estimate)

A production system implementation is the shortest and most robust way to success towards sustainable, world-class operations

3-5 years transformational journey ROI/NPV drives the approach, to “pay-as-you-go”, which builds business leadership support Cultural change enables sustainable results The focus on operation transformation and integration of supply chain is critical to deliver full value to the client

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DuPont Sustainable Solutions

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DuPont Sustainable Solutions Safer Workplace

Protecting the Environment

Employee Safety

Contractor Safety

MECS Sulfuric Acid Technology

BELCO® Scrubbing DILA Technology

Process Safety

Increased Productivity

Environmental Scrubbing Management Technologies

STRATCO® Alkylation

IsoTherming® Hydroprocessi ng

Reduced Footprint

Sustainable Assets

Energy Efficiency

Enabled Workforce

eLearning Systems

Instructor Led Training

Media Tools

DuPont Sustainable Solutions brings value to our clients

Improving the Management of Risk Improving Profitability Improving Sustainability

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Our unique proposition is to leverage DuPont owner operator experience and enabling our client to “operationalize” sustainability As an owner we know that transformational changes are not only driven by: Strategy, Or Management Systems, Or Technical Solutions… Or Capabilities Development, Or Organisational Design… …but by integration of the above, following a structured roadmap, building capabilities, and enabling cultural change to drive sustainable results from your operations

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Minimizing the risks and extracting the maximum value from an integrated operations system Unlock Value of Assets (people, Materials, Investment)

Risks & Footprint reduction

Capacity release

Debottlenecking

Supply chain improvement

Cost productivity

Innovation and Future business results

TO

FROM

Experts

Everybody on the shop floor

Initatives & projects

Capability development

Slower, non-sustainable

Faster and sustainable

Higher risks

Lower risks

Dependent culture

Interdependent culture

Stove-pipe structure

Integrated architecture

Push

Pull

Sustainable Results 7/10/2013

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Client Case: Designing & implementing an Integrated Production System that enables transformation towards world-class operational performance Client’s needs

Company performance improvement Integrated approach to operations management: operations systems and procedures, management processes, people capabilities mindsets and culture.

Key questions & Approach How can the corporation accelerate progress towards performance goals?

1

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How should operations organize itself to ensure alignment and operational discipline in executing the corporate and business strategies?

Leadership Alignment & Commitment

Develop executive leadership alignment around operational objectives with the intent to determine top-to-bottom commitment to continually improving operations efficiency Establish long-term operational goals Establish case for change

2

How can operations efficiency and effectiveness be improved in an integrated and sustainable way?

3 Production System Design

Management Process Culture Transformation Capability Building Diagnose & Improvement Tools

Operations

Energy

M&R

Lean Manufacturing Technology Safety

Benefits

Integrated Production System Implementation of the system site-per-site Structured approach: diagnose, implement, sustain Focusing early on value release, optimizing existing activities in the process. Leadership, teamwork and problem solving empowering employees, driving culture change

A sustainable roadmap with significant yearon-year payback that enables to deliver the business objectives Very significant contribution to the bottom line ( $1B, or up to 20% of operating costs) World-Class Operational Practices and Culture in 4-5 years


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